The Truth About Annuities: Expectations vs Reality

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Hi there, Stan the Annuity Man,

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America's annuity agent, licensed in all

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50 states. Glad you joined me for

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today's topic, which is are annuity

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expectations versus reality. This one's

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a big one. It makes a lot of sense to

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me. It needs to make a lot of sense to

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you before you make any types of

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decisions. But let's listen to music

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first now.

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[Music]

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So, annuity expectations versus reality.

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I know there's a lot of people out there

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that are going, I don't want to buy an

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annuity because annuities have high fees

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and expenses. That's that's not true. I

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mean, most don't have any uh internal

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fees or expenses. Um, so that's not

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true. Or people say, well, I just I

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manage my investments and I got a 401k.

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I don't need annuities. That's fine. And

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that might be true. you might not need

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to transfer risk for contractual

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guarantees or things like that. But with

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annuities, you have to understand these

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are contracts. They're transfer risk

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contracts that primarily solve for four

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things. The first is uh principal

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protection. Second is income for life.

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Third is legacy and the other the fourth

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one is long-term care confinement care.

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That acronym is pill. Once again,

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principal protection, income for life,

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legacy and long-term care. So, annuity

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expectations versus reality also comes

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down to how those products, annuity

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products are presented and pitched um

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during the sales process. But just

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understand if it sounds too good to be

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true, it is every single time. So, let's

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do annuity expectation sales pitch and

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I'm going to tell you the reality. The

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first one that that comes to mind for me

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is the one that surrounds that index

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annuity pitch, which is market upside

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with no downside or market participation

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with principal protection. Well, heck,

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that sounds great, but it doesn't work

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like that. And you know that and I know

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it's pitched like that and you see ads

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like that and you go to the Bad Chicken

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Seminar and they're pitching that and

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you want it to be true. you I mean we

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all would want principal protection with

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market returns every year over and over

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and over and if that was actually a true

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reality of that product then that's all

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that chairman pal at the Fed at the time

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of this taping would buy or Janet Yellen

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or whoever or institutions in general

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that's all they would buy because that's

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isn't that what we all want principal

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protection and market returns seven to

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nine and 10 10% return and if you see a

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lot of the advertisements out there or

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go to the bad chicken dinner seminars or

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meet with someone. They'll show you back

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test and numbers. Well, if you don't 10

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years ago, you'd have made this and in

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addition, we give you an upfront bonus.

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Just remember, if you don't know who the

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sucker is at the table, as they say in

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Las Vegas, it's you. Don't be dumb. The

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expectations is market upside with no

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downside. The reality is 2 to 4% return

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on index annuities average blended over

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time. Yes, some will be higher, some

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will be lower, but if you get a 7%

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return one year on a cap and the next

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year is zero, what's your return? Three

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and a half, right? I mean, it is what it

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is. There's no index annuity that's just

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going to keep getting the the, you know,

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seven, eight, nine% year after year

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after year. That's not how markets work.

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And at the time of this taping, we're

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going through some choppy choppy

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scenarios. Um, you know, going forward.

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I will say this too, and this is this

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isn't the second one, but um I had Wade

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Foul on my podcast, Fun with Annuities

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recently, and he was destroying the 4%

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rule. That's another thing that you just

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don't need to buy an annuity. Just peel

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off 4%. And you're good to go. And and

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with growth and all this stuff, you

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never have to buy a contractually

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guaranteed annuity for lifetime income,

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etc. He destroyed that factually. I

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think that's another one that people

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have in their heads. Well, I don't need

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an annuity. You might not, but it's very

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easy to be a genius in a bull market

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when markets are choppy. You know, it's

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it's a lot harder to um be the genius,

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be Gordon Gecko, be the master of the

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universe. I think the second thing when

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you're talking about um just

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expectations versus realities. And a lot

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of this revolves around bad sales

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pitches is inflation. At the time of

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this taping, inflation is the gorilla in

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the room. It's a big darn gorilla in the

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room. Um, and people don't know how to

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solve for it. And they're looking for

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products that can solve for it or may

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solve for it. And I'm just telling you,

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they don't exist. They don't exist. Just

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like a product that's market upside with

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no downside, it doesn't exist. A product

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for inflation, uh, that adjusts for

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inflation, it doesn't exist. However,

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you'll hear that it does. You'll hear

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annuity sales pitches that'll say,

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"Yeah, well, when the index returns, you

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know, it's going to adjust for inflate."

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It doesn't. It does not do that. Okay?

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Anytime you hear something that sounds

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too good to be true, it is every single

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time with no exceptions. And there's not

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an annuity company on the planet that's

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figured out how to track inflation,

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um, no one's going to be able to to

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track inflation at the current

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percentages at the time of this taping

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and adjust for that. Do you know that?

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Can you buy lifetime income guarantees

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that have increases to the income

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stream? Absolutely. They're called cost

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of living adjustment writers. COA is the

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acronym. Cost of living adjustment. COA

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adjustment writers. In the past used to

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get CPIU, consumer price index of urban

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consumers. That's that index. And would

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increase by that amount. And at the time

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of this taping, that doesn't exist. You

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can't even buy those increases anymore.

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But just understand this. Annuity

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companies have the big buildings for a

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reason.

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Anytime you say, "I need the income to

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increase," just visually, here's the

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Madonna annuity correlation. Same

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annuity without an increase, same

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annuity with an increase. That's where

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it starts. Typically, it's a 6 to9year

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break even point. Just just kind of a

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ballpark on how long it takes to make

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up. And mathematically, a lot of times

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it just doesn't make sense. Do you will

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we run the quote for you? Sure.

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Absolutely. We'll run that quote for you

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all day long and show you the disparity.

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But just remember, annuity companies

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don't give that away. You already own

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the best inflation annuity on the

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planet. It's called social security.

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Why? Because it's not actuary driven.

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It's politically driven. When it comes

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to the increases, they'll just you just

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have politicians go, "Yep, let's just

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raise that sucker because we don't want

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those people not to vote for us." They

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say it like that, too. So inflation's

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the other one that you know the reality

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the sales pitch is is one thing but the

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reality is another thing. The third and

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final thing and I give this credit to my

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CEO because I asked her about these and

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she goes and she gave me this one and

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the one that she said is there's not one

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product that solves for everything.

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A lot of times in the index annuity

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world, the pitch is, well, it'll you get

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an upfront bonus. You get lifetime

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income. You get market growth with

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principal protection. And you get free

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long-term care. Okay, that sounds great.

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That sounds like everything we need.

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Martha, no. Okay, it doesn't work like

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that. If you're going to solve for

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principal protection or if you're going

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to solve for lifetime income or if

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you're going to solve for legacy or if

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you're going to solve for long-term

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care, solve for that one at a time.

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Okay? There's not one on oneizefits-all

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product. Period. There's not one

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sizefits-all drug that you take. You

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know, annuities are not multivitamins.

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All right? You can't just take one pill.

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You can't just buy one product and say,

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"Think you solved it." And if someone's

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pitching it like that, then you shame on

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you for listening to them or at least

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leaning toward it. Kills me all the

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time. I got a call the other day and I I

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literally took a sales pitch that a

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person got and I just shot it down

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factually. I mean, factually, not

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because I was angry, just factually.

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He's like, "Yeah, but it sounds really

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good." I'm like, "Well, heck, you know,

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a pill that makes you skinny with

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six-pack abs sounds really good, but you

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know, would you buy that? Maybe, but it

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doesn't work." So, the bottom line with,

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you know, the reality of the sport with

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annuities is that the sales pitch

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typically doesn't match the reality.

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There should be no sales pitch when

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you're talking about annuities. It

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should all be contractual realities. And

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I always tell people, if you buy the

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dream, you're going to end up owning the

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contractual realities because when you

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get that policy in the mail, it's

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contract and you better read it because

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that's what you're going to get. If you

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bought the dream of hypotheticals and

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theoreticals and all this stuff, if if

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you unfortunately bought anything for an

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upfront bonus, you need to free look

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that policy. Okay? There's no

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philanthropist at annuity companies

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giving money away. So, you just need to

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be very very careful out there. Put on

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your thinking cap. Don't put on your

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dream cap. You know, it takes a long

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time to get in shape physically, okay?

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It's not an overnight sensation. There

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are no overnight sensational type

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products in the annuity world. Even

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though they're they are presented as

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such, you need to look at them for what

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you're trying to solve for. Remember,

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I'm going to ask you two questions or

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someone on my team if you book a call

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with us, and that is what do you want

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the money to contractually do? And when

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do you want those contractual guarantees

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to start? If you answer the first one, I

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want market growth, then our

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conversation's over, then you don't need

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an annuity of any type. I know there's

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agents and advisors out there would

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disagree with that, but they know I'm

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right. They instinctually know I'm

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right. So, if you want market returns,

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then don't buy an annuity. That's okay.

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That's okay. But if you want lifetime

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income or if you want legacy, you want

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long-term care, if you want to protect

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the principle, then an annuity strategy

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might be a contractual fit for your

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specific situation. So, just remember

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with annuity expectations versus

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reality, annuities are contracts. You're

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buying them for the contractual

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guarantees. You're owning an annuity of

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any type for what it will do, not what

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it might do. Do me a favor, go to my

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site, run quotes on my proprietary

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calculators, best and most most simple

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simplest in the business. I mean,

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really, really good. Get my books for

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free and under no obligation. Book a

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call with us. Hit the subscribe button

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and I'll see you on the next Stan the

9:52
Annuity Man YouTube video.

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[Music]